SEC Pours Cold Water on BTC Futures Market
3 min read
The U.S. Securites and Exchange Commission (SEC) has issued a statement about the BTC futures market, calling for investors to exercise caution and be mindful of risks.
In the statement, the SEC’s Division of Investment Management (IM), “strongly encourages any investor interested in investing in a mutual fund with exposure to the BTC futures market to carefully consider the risk disclosure of the fund, the investor’s own risk tolerance, and the possibility, as with all investing, of investor loss,” the SEC said.
What are BTC futures and what does the SEC think about them?
BTC futures allow investors to gain exposure to BTC without having to hold or store the cryptocurrency itself.
Like any other futures contract for a commodity or stock, BTC futures give investors the chance to speculate on the future price of BTC. In the SEC’s statement, BTC futures are described as highly speculative.
In addition, the SEC warned against price volatility and scams in the wider BTC market
“Investors should consider the volatility of BTC and the BTC futures market, as well as the lack of regulation and potential for fraud or manipulation in the underlying BTC market,” the SEC said.
This isn’t the first time that the SEC has shared its thoughts on the BTC futures market.
Shortly after BTC futures began trading in 2017, the SEC released the Cryptocurrency Holdings Letter, which acknowledged how the BTC futures market was—at the time—a nascent market.
Since then, the SEC’s view has evolved. Despite giving an overall warning about the risks inherent in the futures market, the SEC has also noted the progress made since 2017.
“The BTC futures market has developed since then, with increased trading volumes and open-interest positions,” the SEC said, adding, “The BTC futures market consistently has produced a reportable price for BTC futures.”
The SEC’s ETF journey
The SEC’s statement comes as a number of applications for BTC ETFs (exchange traded funds) have landed on its desk.
As of last month, the SEC had received at least eight high-profile BTC ETF applications. These applications include one from VanEck, which already runs many ETFs across other sectors. The SEC has pushed their decision on VanEck’s BTC ETF proposal to at least June of this year.
The SEC is also dealing with ETF applications from Mike Novogratz’s Galaxy Digital, Anthony Scaramucci’s SkyBridge Capital, and the New York Digital Investment Group. As yet, none have been approved.
However, to the north, BTC ETFs have flourished. Canada approved its first BTC ETF in February of this year when the Purpose BTC ETF began running on the Toronto Stock Exchange.
Canada has since approved two other ETFs, putting further pressure on the U.S. SEC to open its doors. Despite the long wait, many Bitcoiners are optimistic that the SEC will soon approve an ETF, partly due to the appointment of Gary Gensler as chairman of the SEC.
Gensler is widely considered to be crypto-friendly, given that he once taught a course on blockchain technology at MIT, and wrote an op-ed suggesting that blockchain technology could be a “catalyst” for change.
With the SEC reiterating its view that the BTC market is volatile and rife with fraud and manipulation, though, the optimism among the crypto community around Gensler’s appointment may be short-lived.
